Selecting Construction Accounting Software
Whether you are purchasing your first construction accounting software solution, or looking to upgrade your current solution, it's important to know a little bit about the marketplace before you start shopping. In this post, we'll talk about the two broad categories of software solutions available to you.
Horizontal vs. Vertical Software
Accounting software comes in two types, horizontal and vertical. Horizontal software was created to fit all small businesses, no matter what industry you are in. Vertical software is specific to one particular industry. Some small business generic software has ‘flavors’ – it’s still horizontal, but has added features for a particular industry. For example, in construction you certainly need the ability to get the standard financial statements, like a Profit and Loss Statement. But you also need to be able to job cost and get good job costing reports. Sometimes a generic software package is just not enough for your needs.
It is important to think about the flow of financial data in your office. Back in the olden days, before simple accounting software was available, the accounting and job costing functions operated separately. A bookkeeper was responsible for paying the bills and keeping track of the money. A project manager was responsible for all the job costing, invoicing, tracking contracts and subcontracts – basically all the project finances. And the two divisions operated independently. Along came the personal computer and things changed. Now, when the bookkeeper enters a bill, he or she can also assign it to a job as well as a line item within that job. Now the project management and accounting functions are often blended into one system.
But the question to ask is: How is this done in my office? Many small contractors keep all the numbers in their head, not bothering about the books. But as construction companies grow, the segregation of duties means that the bookkeeper becomes responsible for cash management as well as producing job cost information for the project managers. Now, the project managers not only need to know what they’ve spent on a job, but need to compare actual costs to budgeted costs, track purchase orders, track change orders and more. And that may be where your software falls short.
Software Selection Guide
This post is an excerpt from our free guide Finding the Right Fit – A Guide to Selecting the Right Software Solution for Your Construction Company. You can download the complete guide for free here.